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Hints for tax planning in respect of residential status 90
25. A Hindu undivided family (like an individual) is either resident in India or non-resident in India. A resident Hindu undivided family is either ordinarily resident or not ordinarily resident. 25.1 When a Hindu undivided family is resident or non-resident - A Hindu undivided family is said to be resident in India if control and management of its affairs is wholly or partly situated in India. A Hindu undivided family is non-resident in India if control and management of its affairs is wholly situated outside India. The table given below highlights the same proposition —
Place of control Control and management of the affairs of a Hindu undivided family is — ■ Wholly in India Resident
■ Wholly out of India ■ Partly in India and partly outside India Residential status of family Ordinarily resident or not
Non-resident Resident See para 25.2 — See para 25.2
Note - In order to determine whether a Hindu undivided family is resident or non-resident, the residential status of the karta of the family during the previous year is not relevant. Residential status of the karta during the preceding years is considered for determining whether a resident family is “ordinarily resident”—see para 25.2. 25.1-1 - Different courts have defined the term “control and management” as follows — ■ De facto control - Control and management means de facto control and management and not merely the right to control or manage—CIT v. Nandlal Gandalal [1960] 40 ITR 1 (SC). ■ Place of control and management - Control and management is situated at a place where the head, the seat and the directing power are situated. The head and brain is situated where vital decisions concerning the policies of the business, such as, raising finance and its appropriation for specific purposes, appointment and removal of staff, expansion, extension, or diversification of business, etc., are taken—San Paulo (Brazilian) Railway Co. v. Carter [1886] AC 31 (HL). ■ Residence of HUF in India - The mere fact that the family has a house in India, where some of its members reside or the karta is in India in the previous year, does not constitute that place as the seat of control and management of the affairs of the family, unless the decisions concerning the affairs of the family are taken at that place. The mere fact of the absence of karta from India does not make the family non-resident—Annamalai Chettiar v. ITO [1958] 34 ITR 88 (Mad.). ■ Broad propositions - The following propositions can be stated on the basis of the rulings given in Subbayya Chettiar v. CIT [1951] 19 ITR 163 (SC) and Narasimha Rao Bahadur v. CIT [1950] 18 ITR 181 (Mad.)— 1. Generally, HUF shall be taken to be resident in India unless control and management of its affairs is situated wholly outside India. 2. HUF may be residing in one place and doing a great deal of business in other place. 3. Occasional visit of a non-resident karta to the place of HUF’s business in India would be insufficient to make HUF ordinarily resident in India. 25.2 When a resident Hindu undivided family is ordinarily resident in India - A resident Hindu undivided family is ordinarily resident in India if the karta or manager of the family (including successive karta) satisfies the following two additional conditions as laid down by section 6(6)(b) :
Additional Karta has been resident in India in at least 2 out of 10 previous years [according to the basic condition (i) condition mentioned in para 24.1-1] immediately preceding the relevant previous year
Additional Karta has been present in India for a period of 730 days or more during 7 years immediately condition (ii) preceding the previous year. If the karta or manager of a resident Hindu undivided family does not satisfy the two additional conditions, the family is treated as resident but not ordinarily resident in India.
